May 2013

A large increase in crude oil prices stands out among numerous factors to explain most of the jump in food prices over the last decade. Indeed, as we found in a recent World Bank study, oil prices were more important to food prices than several other long-term price drivers, including exchange rates, interest rates and income. This finding has important implications for policy and for governments hoping to mitigate the negative effects of food price swings.

Initially, the post-2004 commodity price increases bore resemblance to the temporary increases of the 1950s (Korean War) and the 1970s (oil crisis). But it is becoming clear that the current situation has a more permanent character. Most commodity prices are now two or three times higher than they were a decade ago. Indeed, nominal prices of energy, fertilizers, and precious metals tripled between the two time periods we compared (1997-2004 and 2005-2007). Metal prices went up by more than 150 percent in that time, and most food prices doubled.

Animation schools in Cambodia are using the power of international trade to reach the poor. In recent years, a number of institutions have emerged to train young Khmers how to draw the characters used in advertisements, cartoons and films. One of the institutes is run by a French school whose graduates have worked on blockbusters such as the Harry Potter, Shrek and Batman movies. These schools are tapping into a multi-billion-dollar global industry and demonstrating Cambodia’s potential to engage in high-tech services trade. They also confirm that small firms and even community-led projects in LDCs can participate in trade in services, while helping children rise out of poverty.

The breakup of the former Soviet Union left more than a dozen newly independent states in its wake. What were the top priorities for these newly-minted governments? Perhaps unsurprisingly, most of them got things started by becoming members of existing international organizations and acceding to international multilateral legal instruments, both rites of passage as symbolic as they are pragmatic for any new country. But they also got quickly to work establishing dozens of bilateral road transport agreements (BRTAs) with other nations. BRTAs, it turns out, form the bedrock of many countries’ transport and trade integration strategies, and they are the first type of agreement concluded in any initiation of foreign trade relations. In other words, when it comes to trade, it all starts with road freight transport.

Ninety minutes after leaving Nairobi, UN flight 13W banks sharply over the Somali coastline in a series of steep turns that line it up for final approach into Mogadishu airport. The sharp turns are standard security measures to minimize exposure to fire from would-be attackers on the ground.

We’ve come to Mogadishu to present the findings of a new Bank study called The Pirates of Somalia: Ending the Threat, Rebuilding a Nation to senior ministers from the Somali government. The report concludes that Somalia cannot ‘buy’ its way out of piracy, and neither can the international community rely solely on its navies and law enforcement agencies to defeat the pirates, whether at sea or on land. The solution to Somali piracy is first and foremost political.

Piracy off the Horn of Africa costs the global economy roughly US$18 billion a year in increased trade costs — an amount that dwarfs the estimated US$53 million average annual ransom paid since 2005, World Bank lead author and Senior Economist, Dr. Quy-Toan Do explains in his presentation to the Somali Ministers and 60 Somali journalists. The threat of piracy forces shippers to alter their routes and pay more for fuel and insurance.